Items to watch for in the borough budget discussions

The Kenai Peninsula Borough Assembly has some decisions to make this week that boil down to a debate between raising the budget for education or not raising taxes.

The assembly has its first chance to pass the fiscal year 2018 budget at its upcoming meeting Tuesday. With the Legislature still without a fiscal plan and funding for education uncertain, the assembly faces the struggle of whether to raise taxes to ensure funding for public services or to cut costs at the expense of some. After public hearings May 2 and May 16, the assembly members may debate and postpone or pass the budget, known as the fiscal year 2018 appropriations bill.

Here are key items to watch for on Tuesday.

Education funding

Kenai Peninsula Borough Mayor Mike Navarre has proposed raising the mill rate on property taxes by 0.5 mills, or approximately 50 cents extra for every $1,000 of property value, to buff out funding for the Kenai Peninsula Borough School District. The borough devotes a significant portion of its annual budget — about two-thirds — to the borough’s school district. In his initial budget, Navarre proposed raising the borough’s contribution to the district by about $1.5 million, in part to compensate for a potential decrease in state funding.

However, the assembly amended his budget to set the minimum contribution at $48.3 million, only slightly above the previous year’s contribution of $48.2 million. The assembly can increase the amount at any time, but the $48.3 million minimum commits at least that much.

At the May 16 meeting, public education supporters dressed in red packed the assembly chambers to ask that the borough increase funding to schools. Kenai Peninsula Borough School District Superintendent Sean Dusek has said flat funding from the borough causes the district to experience a funding reduction, as costs increase each year.

Mill rate

Part of the reason the assembly rejected Navarre’s proposed education funding increase was concern about raising the mill rate. The borough’s general mill rate is currently set at 4.5 mills, or $450 for each $100,000 in property value. Service area mill rates are set on top of that — for instance, a resident of the Central Emergency Service Area on the central Kenai Peninsula pays an additional 2.72 mills atop the 4.5.

Assembly member Jill Schaefer, who proposed the amendment to reduce Navarre’s education funding amount, said at the May 2 meeting she didn’t want to increase the mill rate as the state goes into a recession and jobs are lost.

“The state is facing a huge deficit,” she said. “People aren’t cutting from education because they want to — the money is not there. Quite frankly, raising taxes right now on a community that is already facing layoffs and people moving is the wrong decision, and I cannot do it. I can’t.”

However, Navarre has said if the assembly moves to increase school funding without a mill rate increase or another source of additional revenue, the borough will begin spending out of its fund balance, which he said he does not consider responsible management.

Grocery tax

In part to provide an alternative to the mill rate increase, assembly member Dale Bagley has proposed reducing the annual sales tax exemption for nonprepared food items. Currently customers at grocery stores outside home-rule cities do not pay sales taxes on nonprepared food items between Oct. 1 and May 1 each year. Bagley’s amendment would move back the exemption date to last between Oct. 1 and March 31, which would generate an additional $1.3 million in sales tax, according to a memo he submitted to the assembly with the ordinance.

Voters in October 2015 approved a proposition that repealed a borough ordinance that allowed general law cities from levying their own sales taxes. The proposition specifically targeted Soldotna at the time, which has since become a home-rule city. Bagley proposed a similar ordinance in April 2016, but the assembly declined to take it up.

“I realize the voters have considered this seasonal sales tax exemption for groceries several times in the last 10 years,” he wrote in the 2017 memo. “However, the current fiscal climate is substantially different from those years, and these funds are need to continue with local government services by both the cities and the borough.”

Because the assembly has to approve the mill rate by the Tuesday meeting, if the members would rather opt for the grocery tax increase, they have to approve it at the Tuesday meeting.

Nondepartmental funding

The borough also contributes funding to several local nonprofits, including the Kenai Peninsula Tourism Marketing Council, the Central Area Rural Transit System, the Kenai Peninsula Economic Development District, the Small Business Development Center and Kenai Peninsula College. Every year, some public commenters take issue with the funding, and last year, the assembly voted to withdraw its support from CARTS both due to budget constraints and concerns about the management.

This year, the nondepartmentals’ leaders asked for similar funding levels, with the exception of KPEDD and KPC asking for increases and CARTS asking to be funded again at the same level.

Assembly member Stan Welles has proposed an amendment to reduce funding for the nondepartmentals, zeroing out the funding for KPTMC, KPEDD and CARTS, but leaving funding for the Small Business Development Center intact. In his comments, he wrote that KPTMC’s services were redundant and unnecessary and that the borough should be reducing its overall budget.

“Respectfully, I am unable to support any mill-rate, food-tax or tax rate increase of any kind,” he wrote. “The lost jobs, wage reductions, cost of living inreases, and more expenses to come such as property tax assessment and gasoline taxs are more than sufficient to deter economic growth.”

The borough takes up the budget during committees Tuesday afternoon and will discuss it at the regular meeting starting at 6 p.m.

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.

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